Sonder(US:SOND)2025-02-12 21:10PART I Item 1. Financial Statements Q3 2024 financial statements show widened net loss, decreased cash, increased stockholders' deficit, and going concern doubts Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2024, reflects a significant decrease in cash and a widened stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $26,957 | $95,763 | | Total current assets | $106,121 | $161,207 | | Total assets | $1,218,036 | $1,521,267 | | Total current liabilities | $473,281 | $506,236 | | Total liabilities | $1,754,978 | $1,897,968 | | Total stockholders' deficit | $(596,467) | $(376,701) | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Q3 2024 operations show slightly increased revenue but a significantly widened net loss due to non-operating charges Q3 Statement of Operations Highlights (in thousands) | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Revenue | $162,114 | $160,896 | | Loss from operations | $(33,923) | $(50,841) | | Loss on preferred stock issuance | $59,490 | $0 | | Change in fair value of forward contract | $86,570 | $0 | | Net loss | $(179,391) | $(57,630) | | Basic and diluted net loss per common share | $(17.82) | $(5.26) | Nine Months Statement of Operations Highlights (in thousands) | Metric | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Revenue | $460,194 | $437,802 | | Loss from operations | $(133,283) | $(174,897) | | Lease adjustment (gains), net | $(95,579) | $(8,576) | | Net loss | $(197,131) | $(183,679) | | Basic and diluted net loss per common share | $(19.85) | $(16.84) | Condensed Consolidated Statements of Cash Flows Nine-month cash flow shows increased cash used in operations, decreased investing, and increased financing, resulting in a net cash decrease Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(90,451) | $(72,537) | | Net cash used in investing activities | $(2,095) | $(12,436) | | Net cash provided by financing activities | $32,287 | $2,758 | | Net change in cash, cash equivalents, and restricted cash | $(60,598) | $(81,953) | Notes to the Condensed Consolidated Financial Statements Notes detail going concern doubt, Marriott agreement, preferred stock impacts, portfolio optimization gains, and legal proceedings - Management concluded substantial doubt about the Company's ability to continue as a going concern for at least one year32 - Mitigation plans include new financing (e.g., $15 million Marriott Agreement, ~$28.6 million Series A Preferred Stock second tranche), operational improvements, and cost-cutting33 - On August 13, 2024, the company entered a license agreement with Marriott, integrating Sonder properties into the "Sonder by Marriott Bonvoy" system37 - In August 2024, agreements were made to sell $43.3 million in Series A Preferred Stock in two tranches, with the first $14.7 million tranche closing in August93 - The company recognized a $58.2 million loss on preferred stock issuance and an $86.6 million change in fair value of a forward contract liability in Q3 20249495 - The 2024 portfolio optimization initiative generated $95.6 million in early lease termination gains for the nine months ended September 30, 2024110 - The company is involved in a putative securities class action lawsuit alleging false and misleading statements from March 2023 to March 2024143 - A February 2024 reduction in force affected 17% of the corporate workforce, incurring approximately $3 million in one-time restructuring costs156157 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management focuses on positive Adjusted FCF through portfolio optimization, Marriott agreement, and new financing, despite going concern doubts - The company's primary focus is achieving sustainable positive Adjusted Free Cash Flow (FCF) via its "Cash Flow Positive Plan"184 - As of June 10, 2024, the portfolio optimization program secured agreements to exit or reduce rent for approximately 105 buildings (4,300 units)178 - Management reiterates substantial doubt about the Company's ability to continue as a going concern, with existing cash potentially insufficient for the next 12 months259263 Key Business Metrics Q3 2024 Live Units decreased due to optimization, but RevPAR, ADR, and occupancy rates significantly improved Key Business Metrics (Q3 2024 vs Q3 2023) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Live Units (end of period) | 10,100 | 11,800 | (14.4)% | | Bookable Nights | 922,000 | 1,048,000 | (12.0)% | | RevPAR | $176 | $154 | 14.3% | | ADR | $207 | $185 | 11.9% | | Occupancy rate | 84.9% | 82.8% | 2.5% | Results of Operations Q3 2024 revenue slightly increased, operating loss narrowed, but surging non-operating expenses led to a larger net loss - Q3 2024 revenue increased 0.8% year-over-year, driven by a 14.3% RevPAR increase, partially offset by a 12.0% decrease in Bookable Nights due to portfolio optimization204 - Q3 2024 cost of revenue decreased 10.0% year-over-year, primarily due to a $10.9 million reduction in rent expense from portfolio optimization205 - For the nine months ended September 30, 2024, lease adjustment gains significantly increased to $95.6 million from $8.6 million due to portfolio optimization lease terminations234236 Non-GAAP Financial Measures Nine-month non-GAAP metrics show improved Adjusted FCF, narrowed Adjusted EBITDA loss, and increased Adjusted EBITDAR Adjusted FCF Reconciliation (Nine Months Ended Sep 30, in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Cash used in operating activities | $(90,451) | $(72,537) | | Cash used in investing activities | $(2,095) | $(12,436) | | FCF | $(92,546) | $(84,973) | | Adjustments (lease termination, restructuring, etc.) | $28,600 | $2,150 | | Adjusted FCF | $(63,946) | $(82,823) | Adjusted EBITDA (in thousands) | Period | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $(12,397) | $(39,366) | $(85,176) | $(127,747) | Liquidity and Capital Resources Q3 2024 cash balance is $27.0 million; management expresses substantial doubt about 12-month liquidity, relying on new financing and strategic initiatives - As of September 30, 2024, the company's cash balance was $27.0 million261 - Management secured financing providing access to approximately $139 million in additional liquidity, including ~$43 million from Series A Preferred Stock and ~$83 million from noteholder agreements260 - Future cash obligations as of September 30, 2024, include $1.0 million in short-term debt, $1.1 billion in long-term operating lease obligations, and $760.0 million for leases not yet commenced266267 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk disclosures from the Annual Report on Form 10-K - There have been no material changes in the company's market risk from disclosures in the Annual Report281 Item 4. Controls and Procedures Management concluded disclosure controls were ineffective due to persistent material weaknesses in internal control over financial reporting - Disclosure controls and procedures were concluded to be ineffective by principal officers as of the period end282 - Material weaknesses in internal control over financial reporting persist in Leases, Control Activities and Environment, and Asset Impairment283284285287 PART II Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 12 of the financial statements - Information regarding legal proceedings is incorporated by reference from Note 12, "Commitments and Contingencies"292 Item 1A. Risk Factors No material changes to the company's risk factors have been reported from the Annual Report on Form 10-K - There have been no material changes to the risk factors from those provided in the Annual Report292 Other Items (Items 2, 3, 4, 5, 6) The company reports no unregistered equity sales, senior security defaults, mine safety disclosures, or Rule 10b5-1 trading arrangement changes - The company reports "None" for Unregistered Sales of Equity Securities (Item 2) and Defaults Upon Senior Securities (Item 3)293294 - Mine Safety Disclosures (Item 4) are not applicable295